Coastal properties have long been in high demand. Sites that offered a view of the ocean and the rhythmic sound of the waves most often carried a premium price tag.
But, now, that premium is threatened by rising tides. Asaf Bernstein, assistant professor of finance at the University of Colorado at Boulder, did a study that showed that homes exposed to sea level rise sell for approximately 7% less than similar properties.
“Two of the biggest risks we face from climate change are flooding and wildfire,” says Josh Sawislak, HIVE dean and principal advisor at 427. “Flooding risk is present in coastal areas as well as inland, riverine areas. Increases in coastal flooding risk are being driven by both sea level rise and the increased frequency and severity of storms. Land use changes, more people moving to coastal areas and the encroachment of the wildland areas also increase these risks, but some of that is also tied to climate change.”
Zillow, an online real estate database company, tracks how hundreds of factors shape and shift the real estate market, including climate change. In this article, the company digs into the data that shows that 386,000 homes would be underwater by 2050 due to sea level rise.
Skylar Olsen, director of economic research at Zillow, is one economist thinking about this now more than ever. Olsen has been with Zillow since 2012 and investigates housing markets all across the country and the importance of place in economic outcomes. She is also dedicated to sharing housing data with policy makers as well as academic and non-profit researchers to further understanding on a whole host of issues.
Olsen spoke with Philip Beere, host of the HIVE RE:Think podcast about how Zillow is tracking how the climate will impact real estate values and what that means for future housing considerations. You can listen here:
As Olsen mentions, the conversation doesn’t stop at flood risk. There are other factors that are equally threatening. Last year, Zillow looked at the threat of forest fires in California, mapping a total of 13,000 homes that are in risk of damage.
“Wildfire is driven by drought and extreme heat events as well as more frequent lightning strikes,” adds Sawislak. “Studies such as the U.S. National Climate Assessment and reports by the UN International Panel on Climate Change document the predictions of these increases in risk. It’s important to note that non-governmental studies such as the Global Risks Report published annually by the World Economic Forum, whose members include some of the largest global corporations, note that climate change induced impacts to water, heat, and migration are the most likely and impactful global risks we face.”
A 427 report, Climate Risk, Real Estate, and the Bottom Line, states that 35% of REIT properties globally are exposed to climate hazards. Of these, 17% of properties are exposed to inland flood risk, 6% to sea level rise and coastal floods, and 12% to hurricanes or typhoons. The report also shares that the U.S. markets most exposed to sea level rise include New York, San Francisco, Miami, Fort Lauderdale, and Boston.
Where does all of this lead? Builders and developers are challenged with the need to improve product that can be resilient to these conditions. It will be no small feat to find land that is priced right, safe and that can appeal to buyers.